Tech start-ups: Let’s end the irrational fear of software patents

Published on 18 Dec, 2017

Shelston IP has in recent years been fairly critical of IP Australia’s ever-tightening policies for examining (and rejecting) patent applications in the computer technology space. To a greater extent, our frustrations tend to arise from our work with local technology start-ups, for whom the availability of patent protection and the presence of a robust patent system are crucial for success in the market.

In this commentary we’re going to address some unfounded and irrational fears of software patents that still circulate in the start-up community. We’ll follow-up separately with a more detailed look into why a robust software patent protection regime is crucial to foster innovation and investment in tech sector start-ups.

In our experience, the irrational fear of patents tends to manifest in programmers, worried that their code is going to infringe somebody’s patent rights and that their world will come crashing down. Breathe and relax. There’s no “patent police” out there in the Internet looking to jump on unsuspecting coders. Here are a couple of points to set minds at ease:

Just because your software might infringe third party patent rights, that doesn’t mean you’ll actually end up being sued for infringement. In practice, many businesses will end up infringing all sorts of third party rights, and never even realize. By way of example: CSIRO for many years held a patent covering WiFi communications. Who knew?

The big tech companies do not use their huge portfolios to stamp out promising start-ups. In fact, the current trend is for bigger companies to embrace start-up innovation, as a source of fostering future talent and acquisition targets.

Ultimately, patent litigation is a risk for any company, but it typically tends only to materialize as an issue when a business is actually successful. Think of it from a practical perspective: who would spend a million dollars plus on patent litigation with no potential to actually recover monetary damages? For a start-up to reach the point of being a litigation target is in some ways a nice problem to have; only a handful of start-ups achieve that.

In fact, it’s tough to identify any concrete evidence of software patents, particularly those owned by the big tech companies, actually inhibiting start-ups from commercializing new technology. The commercial strategies of the bigger end of town tend to revolve around owning their own market segments by continued high-paced development and innovation, as opposed to engaging in “David and Goliath” litigation for no clear commercial gain.

For start-ups, we would suggest that software patent “fears” should actually be fears associated with weakening of protection regimes. A lot of the anti-software patent lobbying tends to come from some of the largest tech companies – and for good reasons. Those market giants are the real litigation targets, and constantly run a real risk of their fast-paced development programs stepping on all sorts of rights, including those owned by the little guys. Consider this nightmare scenario: a tech giant develops and releases a new functionality, which innocently replicates the technology that is being developed in parallel by a small start-up, which is still at a fledgling stage. The small start-up instantly becomes redundant in the market, and reaches an unfortunate end to the commercialization journey. If the small start-up has patent rights in place or pending, however, there are still options available such as monetization via patent enforcement against the tech giant. That can also involve a litigation funder (or “patent troll”) stepping in to lend its expertise. That sort of story can, and typically does, keep risk managers of large companies awake at night.

Software patents for start-ups. They’re not that scary; they offer necessary protections for founders and investors.

Industries

At Shelston IP, we recognise the imperative to develop and maintain a high level of knowledge about our clients’ businesses, and the industries in which they operate. We have accumulated deep experience in all of the ‘IP-reliant’ sectors, meaning those that are technical, knowledge-intensive and research-driven.
Many of our practitioners held positions of responsibility within corporate Australia and public institutions prior to qualifying as attorneys. Today, we strive hard to stay connected and informed through active involvement in a large number of industry associations and professional bodies. This includes participating in task forces, committees and specialist work groups which have been assembled to aid the progression of our sectors.